Crown Media Holdings Announces Operating Results for Fourth Quarter of 201208:30 EST Friday, February 22, 2013
STUDIO CITY, Calif. (Business Wire) -- Crown Media Holdings, Inc. (NASDAQ:CRWN) today reported its operating
results for the three months and year ended December 31, 2012.
Operating HighlightsStrong Operating and Financial Results. Adjusted EBITDA for the
year ended December 31, 2012 increased 18% over last year to $137.7
million on the strength of an 8% increase in total revenues and a 2%
decrease in programming costs.
Hallmark Channel Holiday Programming Success. Over the course
of its holiday schedule, from November 10 through December 30,
Hallmark Channel ranked as the #1 cable network in weekend primetime
(Sat-Sun, 8-11pm) among women 25-54, households, and total viewers
according to Nielsen. With 1,100 hours of holiday programing,
“Countdown to Christmas” reached more than 65.4 million unduplicated
viewers overall, while the 12 new original movie premieres attracted
more than 21.1 million unduplicated viewers and delivered the #1 rated
ad-supported cable movie of the day for seven consecutive Saturdays.
Five of those seven movies ranked as the #1 cable program of the day.
The seasonal programming also brought Hallmark Channel its highest
week of all time, from November 26 to December 2.
Hallmark Movie Channel Achieves Key Distribution Milestone.
Hallmark Movie Channel recently marked the important distribution
benchmark of 50 million homes, with the channel's February 2013
universe estimate at 49.8 million homes, an increase of 897,000 homes
over the January 2013 universe estimate, according to Nielsen. Since
becoming Nielsen measured in April 2010, Hallmark Movie Channel has
added nearly 16 million new subscriber homes, representing the largest
percentage increase of any cable network in that period.
Original Content Continues to Draw Viewers to Hallmark Channel. Kicking
off the year, the January 12 premiere of “The Nearlyweds” was the #1
rated prime time ad-supported cable movie of the day, earning a 1.2
household rating and reaching 2.1 million unduplicated viewers. One
week later, the debut of “The Sweeter Side of Life” on January 19
delivered a 1.8 household rating and reached 3.1 million unduplicated
viewers. “Be My Valentine”, the most recent original movie premiere,
continued the trend with another 1.8 household rating and an audience
of more than 3 million unduplicated viewers.
Upfront Negotiations Nearly Completed. 2013 calendar year
Upfront negotiations are nearly completed for both Hallmark Channel
and Hallmark Movie Channel, reflecting the maintenance of strong
relationships with a diverse group of high-quality, stable advertisers.
“We implemented a number of strategic initiatives and reached some key
milestones in 2012 that positioned our business for strong results in
fourth quarter and for the full year,” said Bill Abbott, President and
CEO of Crown Media Family Networks. “Fourth quarter culminated in
another highly successful run of Hallmark Channel's ‘Countdown to
Christmas' campaign, which garnered record ratings and positively
impacted advertising sales revenue. On the Hallmark Movie Channel side,
the network continues to show impressive growth, recently reaching the
key distribution benchmark of 50 million subscriber homes. At the outset
of 2013, we have a strong foundation from which to further develop our
business and monetize the gains we are seeing in ratings and
distribution.”
Financial Results
Historical financial information is provided in tables at the end of
this release.
Operating Results
For the fourth quarter of 2012 Crown Media reported revenue of $102.3
million, a 3% increase from $99.6 million in the fourth quarter of 2011.
Advertising revenue increased 2% to $83.1 million from $81.7 million in
the fourth quarter of 2011 due to Hallmark Movie Channel audience
growth. Subscriber fee revenue increased 7% to $19.1 million from $17.8
million in the fourth quarter of 2011 due to contractual rate increases.
Crown Media reported revenue of $349.9 million for 2012, an 8% increase
from $323.4 million for 2011. Advertising revenue increased 8% to $271.2
million during 2012 from $251.3 million during 2011. Subscriber fee
revenue increased 9% to $78.0 million, from $71.7 million in the prior
year.
For the fourth quarter of 2012, cost of services increased 1% to $39.8
million from $39.3 million during the same quarter of 2011.
For 2012 cost of services decreased 1% to $148.3 million from $149.0
million during 2011. Within cost of services, programming expenses
decreased $2.2 million to $134.5 million due to the expiration of a
number of programming license agreements. Other cost of services
including amortization of capital leases increased 12% from $12.3
million in 2011 to $13.7 million for 2012 due to increases in residual
expense of $2.0 million from increased usage of original programming.
Selling, general and administrative expense increased 35% to $16.8
million for the fourth quarter of 2012 from $12.5 million during the
same quarter of 2011 due to the increases in performance-based employee
costs and legal expenses of $2.5 million and $1.5 million, respectively.
Selling, general and administrative expense increased 9% for 2012 to
$59.2 million from $54.2 million during 2011. Research costs increased
$0.9 million, legal costs increased $1.7 million, and performance-based
employee costs increased $4.0 million. During 2011 the Company recorded
non-recurring banking fees of $2.5 million attributable to its June 2010
recapitalization.
Marketing expense increased to $2.2 million for the quarter ended
December 31, 2012, from $6.3 million for the quarter ended December 31,
2011 due to the promotion of original holiday programming. Marketing
expenses of $10.2 million for 2012 increased $0.4 million from $9.8
million for 2011.
Interest expense decreased $0.6 million for the three months ended
December 31, 2012 as compared to the three months ended December 31,
2011. Interest expense on the Note was $8.0 million and $8.1 million for
the three months ended December 31, 2011 and 2012, respectively.
Interest expense on the Term Loan was $3.3 million and $3.0 million for
the three months ended December 31, 2011 and 2012, respectively.
Interest expense increased $20.2 million for 2012 as compared to 2011
due to the 2010 Recapitalization and the treatment of this transaction
under troubled debt restructuring accounting. Interest expense on the
Term A and Term B loans was $1.5 million for 2011. Interest expense on
the Note was $14.8 million and $32.2 million for 2011 and 2012,
respectively. Interest expense on the Term Loan was $6.0 million and
$12.2 million for 2011 and 2012, respectively.
The Company recorded income tax expense of $0.5 million for the three
months ended December 31, 2011. The income tax benefits recorded for the
three months and year ended December 31, 2012, were $44.8 million and
$22.6 million, respectively. During 2011, the Company released $236.0
million of valuation allowance while the Company released $54.2 million
of valuation allowance during 2012.
Adjusted EBITDA was $38.5 million for the fourth quarter of 2012
compared to $42.3 million for the same period last year. Cash provided
by operating activities totaled $10.5 million for the fourth quarter of
2012 compared to $15.5 million for the same period last year. The net
income to common shareholders for the quarter ended December 31, 2012,
totaled $70.1 million, or $0.19 per share, compared to $29.9 million, or
$0.08 per share, in the fourth quarter of 2011.
Adjusted EBITDA was $137.7 million for 2012 compared to $116.9 million
for 2011. Cash provided by operating activities totaled $30.7 million
for 2012 compared to $41.5 million for 2011. Net income to common
shareholders for 2012 totaled $107.4 million, or $0.30 per share,
compared to $249.0 million, or $0.69 per share, for 2011.
Conference Call and Webcast to be Held Friday, February 22nd,
at 11:00 a.m. ET
Crown Media Holdings' management will conduct a conference call today at
11:00 a.m., Eastern Time to discuss the results of the fourth quarter
and year ended December 31, 2012. Investors and interested parties may
listen to the call via a live webcast accessible on the Company's
investor relations page, http://ir.crownmedia.net/,
or by dialing (877) 307-0246 (Domestic) or (224) 357-2394
(International) and using the conference number 87608420. For those
listeners accessing the call through the Company's website, please
register and download audio software at the site at least 15 minutes
prior to the start of the call. The webcast will be archived on the
site, and a telephone replay of the call will be available for 7 days
following the call beginning at 1:00 p.m. Eastern Time on Friday,
February 22nd at (855) 859-2056 (Domestic) or (404) 537-3406
(International), using the conference number 87608420.
About Crown Media Holdings
Crown Media Holdings, Inc. is the corporate parent for the portfolio of
cable networks and related businesses under Crown Media Family Networks.
The company currently operates and distributes Hallmark Channel in both
high definition (HD) and standard definition (SD) to over 87 million
subscribers in the U.S. Hallmark Channel is the nation's leading network
in providing quality family programming with an ambitious slate of
original TV movies, general entertainment, and an array of home and
lifestyle content. Hallmark Channel's sibling network, Hallmark Movie
Channel, is available in 50 million homes in HD and SD. One of America's
fastest-growing cable networks, Hallmark Movie Channel provides
family-friendly original movies with a mix of classic theatrical films,
and presentations from the acclaimed Hallmark Hall of Fame library. In
addition, Crown Media Family Networks includes the online offerings of
HallmarkChannel.com and HallmarkMovieChannel.com.
Forward-looking StatementsStatements contained in this press release may contain
forward-looking statements as contemplated by the 1995 Private
Securities Litigation Reform Act that are based on management's current
expectations, estimates and projections. Words such as “expects,”
“anticipates,” “intends,” “plans,” “believes,” “estimates,” variations
of such words and similar expressions are intended to identify such
forward-looking statements. Forward-looking statements are subject to
risks and uncertainties, which could cause actual results to differ
materially from those projected or implied in the forward-looking
statements. Such risks and uncertainties include: competition for
distribution of channels, viewers, advertisers, and the acquisition of
programming; fluctuations in the availability of programming;
fluctuations in demand for the programming Crown Media airs on its
channels; our ability to address our liquidity needs; our incurrence of
losses; our substantial indebtedness affecting our financial condition
and results; and other risks detailed in the Company's filings with the
Securities and Exchange Commission, including the Risk Factors stated in
the Company's most recent 10-K and 10-Q Reports. Crown Media Holdings is
not undertaking any obligation to release publicly any updates to any
forward looking statements to reflect events or circumstances after the
date of this release or to reflect the occurrence of unanticipated
events.Use of Adjusted EBITDACrown Media evaluates operating performance based on several factors,
including Adjusted EBITDA. Our calculation of Adjusted EBITDA adds back
non-cash expenses and other items mentioned below.Our measure of Adjusted EBITDA differs from the normal definition of
EBITDA (earnings before interest, taxes, depreciation and amortization)
used by most companies. We define Adjusted EBITDA as earnings before
interest, taxes, depreciation, amortization, subscriber acquisition fee
amortization, and other non-cash expenses. For this purpose, restricted
stock unit compensation and long term incentive plan expense are treated
as non-cash items, although they may result in cash payments during
subsequent periods. See “Selected Unaudited Financial Information” below
for a reconciliation to GAAP net income. Management views Adjusted
EBITDA as a critical measure of our operating performance and monitors
this measure closely. We disclose Adjusted EBITDA so that our investors
can have some of the same information available to our management to
evaluate their investment in our Company.We also believe that an Adjusted EBITDA provides an indication of the
Company's ability to generate cash flows from operating activities since
our non-cash expenses are excluded from our calculation of Adjusted
EBITDA. The Adjusted EBITDA calculation allows the Company to assess how
much is available to pay debt service and gives a further indication of
how much remains to fund discretionary expenditures such as the
acquisition of programming or additional subscriber base. However,
Adjusted EBITDA should be considered in addition to, not as a substitute
for, historical operating income or loss, net loss, cash flow from
operations and other measures of financial performance reported in
accordance with accounting principles generally accepted in the United
States.Adjusted EBITDA differs significantly from cash flows from operating
activities reflected in the consolidated statement of cash flows. Cash
flow from operating activities is net of interest and taxes paid and is
a more comprehensive determination of periodic income on a cash basis,
exclusive of non-cash items of income and expenses such as depreciation
and amortization. In contrast, Adjusted EBITDA is derived from accrual
basis income and is not reduced for cash invested in working capital.
Consequently, Adjusted EBITDA is not affected by the timing of
receivable collections or when accrued expenses are paid. We are not
aware of any uniform standards for determining EBITDA or our Adjusted
EBITDA and believe that our calculation of Adjusted EBITDA is probably
calculated differently than presentations of EBITDA by other entities
because our calculation was based upon the definition in a bank credit
agreement.
Crown Media Holdings, Inc.Unaudited Consolidated Income Statement Information
(In thousands, except per share data)
Three Months Ended December 31,Years Ended December 31,
2012
2011
2012
2011
Revenue:
Advertising
$
82,045
$
80,645
$
268,252
$
249,888
Advertising by Hallmark Cards
1,079
1,079
2,990
1,437
Subscriber fees
19,053
17,774
78,005
71,668
Other revenue
124
70
623
368
Total revenue, net
102,301
99,568
349,870
323,361
Cost of services:
Non-affiliate programming
34,864
35,277
131,186
134,742
Hallmark Cards affiliate programming
1,295
799
3,363
2,040
Amortization of capital lease
290
290
1,158
1,158
Other cost of services
3,375
2,950
12,546
11,108
Total cost of services
39,824
39,316
148,253
149,048
Selling, general and administrative expense
16,814
12,484
59,156
54,224
Marketing expense
8,510
6,308
10,179
9,816
Depreciation and amortization expense
408
358
1,477
1,455
Gain on extinguishment of indemnification
-
(1,246
)
-
(1,246
)
Income from operations before interest
and income tax expense
36,745
42,348
130,805
110,064
Interest expense
(11,401
)
(11,971
)
(46,056
)
(25,857
)
Income from operations before income tax expense
25,344
30,377
84,749
84,207
Income tax benefit (expense)
44,768
(504
)
22,604
234,589
Income before gain from sale of discontinued operations
70,112
29,873
107,353
318,796
Gain from sale of discontinued operations, net of tax
-
1
-
189
Net income and comprehensive income
70,112
29,874
107,353
318,985
Income allocable to Preferred Stockholder
-
-
-
(69,974
)
Net income attributable to common stockholders
$
70,112
$
29,874
$
107,353
$
249,011
Net income per share - basic
$
0.19
$
0.08
$
0.30
$
0.69
Net income per share - diluted
$
0.19
$
0.08
$
0.30
$
0.69
Weighted average number of common shares outstanding
359,676
359,676
359,676
359,676
Unaudited Consolidated Balance Sheets
(In thousands, except share and per share data)
As of December 31,
As of December 31,
2012
2011
ASSETS
Cash and cash equivalents
$
43,705
$
35,181
Accounts receivable, less allowance for doubtful
accounts of $245 and $181, respectively
92,062
83,798
Programming rights
85,946
98,158
Prepaid programming rights
13,820
11,533
Deferred tax asset, net
34,200
14,200
Prepaid and other assets
2,326
1,174
Total current assets
272,059
244,044
Programming rights
174,971
154,428
Prepaid programming rights
13,748
-
Property and equipment, net
10,455
11,236
Deferred tax asset, net
225,149
221,800
Debt issuance costs, net
10,421
11,711
Other assets
3,826
1,217
Goodwill
314,033
314,033
Total assets
$
1,024,662
$
958,469
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued liabilities
$
25,801
$
15,391
Audience deficiency reserve liability
5,679
10,256
Programming rights payable
112,503
135,768
Payables to Hallmark Cards affiliates
1,239
4,051
Interest payable
14,468
17,135
Current maturities of long-term debt
19,600
19,600
Total current liabilities
179,290
202,201
Accrued liabilities
15,852
16,667
Programming rights payable
30,121
8,737
Long-term debt, net of current maturities
468,040
487,368
Total liabilities
693,303
714,973
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Class A common stock, $.01 par value; 500,000,000 shares
authorized; 359,675,936 shares issued and outstanding as of
both December 31, 2012 and 2011
3,597
3,597
Paid-in capital
2,062,751
2,082,241
Accumulated deficit
(1,734,989
)
(1,842,342
)
Total stockholders' equity
331,359
243,496
Total liabilities and stockholders' equity
$
1,024,662
$
958,469
Crown Media Holdings, Inc.Selected Unaudited Financial Information
(in thousands)
Three Months Ended December 31,Year Ended December 31,
2012
2011
2012
2011
Net income
$
70,112
$
29,874
$
107,353
$
318,985
Gain from sale of discontinued operations
-
(1
)
-
(189
)
Gain from extinguishment of indemnification
-
(1,246
)
-
(1,246
)
Promotion and placement expense
297
317
1,191
1,211
Depreciation and amortization
698
648
2,635
2,613
Interest expense
11,401
11,971
46,056
25,857
Income tax (benefit) expense
(44,768
)
504
(22,604
)
(234,589
)
Bank fees
-
-
-
2,500
Long term incentive plan expense
692
199
2,804
1,673
Restricted stock unit compensation
39
39
237
67
Adjusted earnings before interest, taxes, depreciation
and amortization
$
38,471
$
42,305
$
137,672
$
116,882
Programming and other amortization
36,555
32,203
129,345
126,255
Provision for allowance for doubtful account
(17
)
193
39
454
Changes in operating assets and liabilities:
Change to programming rights
(62,439
)
(31,882
)
(131,964
)
(140,464
)
Change to prepaid programming rights
10,023
6,872
(16,035
)
(7,434
)
Change in programming rights payable
22,254
(5,970
)
(1,033
)
8,949
Interest paid
(3,115
)
(3,379
)
(46,909
)
(5,951
)
Amounts paid to Hallmark Cards under tax
agreements
(11,740
)
(761
)
(22,338
)
(11,296
)
Changes in other operating assets and
liabilities, net of adjustments above
(19,497
)
(24,106
)
(18,097
)
(45,913
)
Net cash provided by operating activities
$
10,495
$
15,475
$
30,680
$
41,482
Crown Media Holdings, Inc.Selected Unaudited Cash Flow Statement Information
(in thousands)
Three Months Ended December 31,Year Ended December 31,
2012
2011
2012
2011
Net cash provided by operating activities
$
10,495
$
15,475
$
30,680
$
41,482
Net cash used in investing activities
(395
)
(321
)
(1,376
)
(1,145
)
Net cash used in financing activities
(831
)
(975
)
(20,780
)
(35,721
)
Net increase in cash and cash equivalents
9,269
14,179
8,524
4,616
Cash and cash equivalents, beginning of period
34,436
21,002
35,181
30,565
Cash and cash equivalents, end of period
$
43,705
$
35,181
$
43,705
$
35,181
Investors and PressCrown Media Family NetworksAnnie
Howell, 212-445-6690anniehowell@crownmedia.com

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